Our key strategy principles

The core principles of KIDF strategy are defined in the Concept and subsequent Decree of the President (number 829 dated January 30, 2019). At the same time the strategy is continuously evolving through resolutions of the Board to capture dynamics of rapidly changing market environment (currently it is being updated to take into account COVID-19 impact on world investment activity and marketplace). Below are some key principles underlining KIDF’s strategy that will stand for good.

Economic development is prioritized with quantifiable impact on sustainable growth in GDP and jobs creation, as well as with quality contribution to enabling environment for private sector development.

To meet the government defined mandate, KIDF funds shall be invested:

• along with and in size equal to or less than foreign direct investments coming in cash form
• within the country and be used strictly for creation/development/recovery of assets within the country
• via pure equity instruments on risk-return basis
• with preference to transactions registered within AIFC framework

KIDF evaluates every project in terms of its individual a) financial performance and b) economy development effect (contributions to GDP, jobs, taxes) as compared to other projects in the review process (active pipeline) as well as its impact on KIDF's invested portfolio (sector exposure, return and risk, expected cash flow pattern).

Joining a foreign investor, KIDF can take part in the following types of investment projects depending on a project stage:

• Greenfield (with involvement of local government offices)
• Brownfield (developing/expanding existing operations)
• Recovery of distressed state-owned assets (portfolios of Distressed Asset Fund, Investment Fund of Kazakhstan)

KIDF operations shall rather supplement than compete with other institutions and investors in the market.

KIDF will consider a foreign business/company as a prospective partner if it meets the following criteria:

• recognizable name/brand in its own market
• sound balance sheet and sustainable operations in the segment of assumed project/development
• positive track record in developing and execution of similar scale projects
• sufficient capacity and resources to develop an assumed project in Kazakhstan

The way we operate

We source our project pipeline primarily via Kazakh Invest (a state investment promotion agency). Kazakh Invest scouts around the world for entrepreneurs and businesses with a recognizable product/service brand, good corporate governance, effective business processes and practices, positive track record, and capability for growth in the region.

When a potential investor indicates an interest in expanding its business into Kazakhstan, a whole set of state agencies and institutions elaborate on feasibility of a prospective development and applicable government support measures necessary to improve economic performance for an investor, if needed.

KIDF takes part in a foreign investor’s initiatives in Kazakhstan in case that investor sees a benefit in sharing equity risk with the state. KIDF joins a prospective transaction near financial closure stage.

* Please note that we deal with institutional investors and IFIs on a deal-by-deal basis (a particular project/transaction/investment funding participation).

Other useful information

TYPES OF TRANSACTION STRUCTURES

There are different ways KIDF can participate in a particular project. No two deals are alike – we approach and execute each transaction in a unique manner. Below are the general guidelines of how a transaction might look like.

Given KIDF’s constraint to invest no more than a foreign investor, for all sample structures below the following equity contribution holds true: $X > $Y. KIDF participates as non-controlling co-investor through a joint venture registered on AIFC.

Example 1. A foreign company invests into greenfield project in Kazakhstan. A Joint Venture is the owner of a project or an asset to be developed. It finances the assumed development both with equity from its shareholders and debt.

Example 2. A foreign company invests into greenfield project in Kazakhstan. An institutional investor or IFI can participate as a minority stakeholder in a Joint Venture. An institutional investor or IFI and KIDF coordinate corporate governance and exit strategy.

Example 3. A foreign company invests into its business expansion based on an existing asset in Kazakhstan. KIDF will cooperate with foreign parties to define and negotiate their participation terms with a local company’s stakeholders. A sum of KIDF’s and IFI investments ($Y + $Xi) shall not exceed investment of a foreign company ($X).

Example 4. A foreign company invests into its business expansion through a subsidiary that has local partners (entities registered in Kazakhstan, individuals with Kazakhstan citizenship or origins). A foreign partner shall have a control over its subsidiary. KIDF will account only for foreign partner’ contributions as a qualifying foreign equity capital against which KIDF will coinvest on its part.

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